Monday, December 7, 2009

Auto Sales – US, China and India

Auto sales are supposedly rebounding in the U.S. I’d love to believe it. It would mean this phony recovery is about to be replaced by a real one. But it’s not yet time to travel down that highway.

The official numbers aren’t in, but November sales should reach about 10.5 million (on an annualized basis). That’s still not close to the more than 13 million cars sold last year.

Besides, it’s just one month. And one month does not make a pattern.

But at least auto sales are over the 10 million mark, the level American car companies say must be reached in order to regain profitability. And, let’s not forget, it was done without the help of the “Clunker” program.

Auto sales are coming back more strongly in Asia. However, says Andy, they’re not great over there either...

“China’s auto sales this year are way up. Recent auto sales show 84% growth in September and 72% growth in October. Thing is, that growth probably isn’t real. I heard that state enterprises are buying fleets of cars they don’t need and parking them instead of driving them.

“If you have another explanation for why gasoline consumption is flat despite the jump in car sales, let me know."

“So Andy, I’ve got the picture. Buying the auto stocks at this juncture doesn’t make a lot of sense,” I said.

“One exception” said Andy.

“There is a potential game changer from India. It’s doing stuff that no other company has ever done. As a result, it’s created a huge market for itself without any competitors.”

“Pretty big market in India?” I asked.

“Last time I checked it was somewhere around 1.2 billion people. With a growing middle class, it’s not a pretty big market. It’s huge.” Replied Andy.